Yesterday the Pound posted its most impressive gain against the Euro for six weeks and the GBP to Euro pairing romped above a two-week high.
The Euro lost ground against its British rival after a Bank of England official intimated that interest rates should be increased as the UK economy returns to normal.
Further Euro to Pound losses occurred on Thursday as the Pound was boosted by better-than-anticipated UK retail sales figures.
Sales increased by 1.8 per cent in February month-on-month and were up an impressive 4.2 per cent on the year.
The surprisingly upbeat report prompted this response from forex strategist Josh O’Byrne; ‘The better retail-sales data should be supportive for Sterling. Citi economists expect growth close to 3.5 per cent this year. This could see the Bank of England tighten policy sooner, perhaps as early as the fourth quarter.’
The Euro also softened against the US Dollar following the release of US GDP, initial jobless claims and pending home sales reports.
While pending home sales slumped by more than anticipated, fourth quarter growth topped initial estimates and initial jobless claims in the world’s largest economy rose by less than forecast.
More Euro movement could occur tomorrow and the common currency may find itself coming under additional pressure.
The Eurozone’s economic confidence report will be of interest, but investors will largely be focusing on German inflation data.
Last month Germany’s inflation data came in at a three and a half year low, adding to the case for the European Central Bank introducing additional stimulus in order to shore up growth in the Eurozone and its largest economies.
Economists have forecast that the pace of consumer price increases slowed in March, with German CPI advancing by 0.4 per cent month-on-month – down from 0.5 per cent in February.
On the year the German consumer price index is expected to provide a reading of 1.1 per cent following the previous month’s 1.2 per cent annual increase.
The EU harmonised German CPI is expected to come in at 0.9 per cent YoY and 0.4 per cent MoM.
If the German inflation figures meet estimates the Euro could edge lower and the EUR/GBP exchange rate may end trading on Friday at a multi-week low.
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,Pound Sterling,0.8277,
Euro,,US Dollar,1.3766,
Euro,,Canadian Dollar,1.5219,
Euro,,Australian Dollar,1.4876,
Euro,,New Zealand Dollar,1.5864 ,
US Dollar,,Euro ,0.7266,
Pound Sterling,,Euro,1.2084,
Canadian Dollar,,Euro,0.6567,
Australian Dollar,,Euro,0.6719,
New Zealand Dollar,,Euro,0.6294 ,
[/table]
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